Section 179
Response to the following problem:
In May 2013, Riddick Enterprises placed in service new 7-year property costing $100,000 and new 5-year property costing $100,000. These are the only two properties Riddick placed in service during the year. Riddick's taxable income before deducting Section 179 expense (but after all other expenses, including depreciation expense) is $1,000,000.
a. Compute Riddick's total depreciation expense deduction assuming Riddick uses regular MACRS and elects to take the maximum Section 179 expense on the 5-year property.
b. Compute Riddick's total depreciation expense deduction assuming Riddick uses regular MACRS and elects to take the maximum Section 179 expense on the 7-year property.
c. Which choice results in the largest total depreciation deduction? Comment on your answers to Parts a. and b.